A little understanding goes a short way

It’s kind of hard to debunk something before it exists, but that’s what Graham Hill attempts with Four Fallacies of Vendor Relationship Management. Says Graham,

VRM is Doc’s response to the problems of customers getting the rough end of the stick in their dealings with companies. Rather than companies owning huge databases of customer transaction data which they can mine for their own advantage, customers should take control of their own transaction data and selectively release it to companies when they want something from them. Sounds simple enough doesn’t it.

Hard to know where to begin here. But I’ll try.

  1. VRM is not just my response. Many are involved in thinking about VRM and developing code and products to make it happen. It’s also still early. There is no code out there to critique yet.
  2. VRM is not just about “the problems of customers getting the rough end of the stick in their dealings with companies”. That’s just one corner of a much large set of problems VRM will work to reduce. Another is poor and not very granular vendor intelligence about what customers actually want. Another is a lack of a uniform and consistent way for customers to manage relationships with multiple vendors. Another is the blindered way that vendors look at “the customer” as a template rather than as an individual, denying vendors much information that might be useful. Another is money left on the table because there is no good way for customers with money to spend to notify whole markets of their wants, in ways that protect the customer’s privacy at the same time. Shall I go on? I can, but I’m not sure it’s worth it.
  3. Where did I, or anybody, say “Customers should take control of their own transaction data and selectively release it to companies when they want something from them”? Yes, VRM will give customers ways to control their own data, to serve as the point of integration for that data, and to share that data in selective and cooperative ways with vendors. “Take control” makes VRM sound like it’s a way for customers to storm the walls of Fort Business. That’s not the idea. Instead the idea is locating data where it makes the most sense, and giving those controlling customer data better ways of applying it. Data about who we are, what we want, where we live, how we do business … Much of this should live on both sides of the relationship system.  Data “ownership” is a sticky and complicated issue. For VRM’s purposes, however, “owning” does not mean wrestling data away from vendors.

Bottom line: VRM is about providing customers with tools that make them both independent actors in the marketplace and better equipped to engage with vendors. Those tools are in development. We need to get some of them out there before we can even begin to have arguments about whether or not they’ll work. Fact is, they will or they won’t. But they deserve a chance before we go salting the soils in which they need to grow.

Graham goes on to list “four fallacies”:

  1. The Fallacy of Ceding Control
    Fallacy One: Companies are just not going to cede control over customers’ data.
  2. The Fallacy of Wanting Control
    Fallacy Two: Customers way want more control over the marketing which is sent to them, but not their actual transaction data.
  3. The Fallacy of Managed Markets
    Fallacy Three: The customer-managed market upon which VRM is built is not viable.
  4. The Fallacy of the Economic Model
    Fallacy Four: There is not a viable economic model underneath VRM.

First, we’re not asking companies to give up data they control. We’re creating ways to share data that will be tood both sides of the relationship. This will take time. It will also probably follow the same realization and adoption curve as open source code acceptance has followed in enterprises.

Second, customers should want control over their sides of relationships with others. Those relationships should include vendors. VRM is not just about controlling (or restricting) marketing stuff that vendors send out, nor is it just about transaction data. Both are relatively small potatoes. What matters are actual customer wants and needs, along with seemingly trivial yet important stuff, such as having a way of gang-notifying many organizations (inluding vendors) that one’s address has changed, instead of notifying one at a time.

Third, we need to get stratight what “free market” we’re talking about  here. Graham writes, “VRM seems to rest on the assumption that it offers a superior way of deciding what products, services and expeiences to offer to customers than the current free market system.” That’s not correct. VRM rests on a number of assumptions, none of which is that. One of them, however, is that it’s good for vendors to know what customers actually want rather than just guessing about it. Huge amounts of money are wasted by vendors on guesswork. Reducing that would be a nice payoff, wouldn’t it? I think Graham believes we’re a bunch of socialists or something. Far from it. Many of us are free-market advocates of the first order. Not that it should matter. Good ideas should stand in their own proven pudding. We don’t have that yet. Just wait.

Fourth, there is no new economic model underlying VRM. Graham writes, “The free market system has driven unprecedented prosperity in those allowed to participate in it too. I don’t see many people queueing up to enter into planned market economies these days? Why throw all that away for a transaction cost heavy model whose economics hasn’t even worked out, let alone tested and proven?” Two problems here. One is that Graham assumes that VRM opposes the free market system, or that it advocates a planned market economy. It does neither. In fact, we look forward to taking advantage of the free market system by getting better information into it. The other is that Graham seems to assume that the free market and the mass market are the same thing. They are not. The free market encompasses the mass market but is not reducible to it. VRM will improve both the mass market and the market for more individuated products and services.

At the end Graham adds,

Whilst I agree in principle that customers need to be given much more control over how they are managed by the companies they transact with, there are already partial solutions in existence such as customer managed relationships, multi-sided markets and even infomediaries, that enable this. VRM is an extreme solution that no-one is really looking for. Not Customers, not companies, not markets, no-one.

Well, as it said here years ago, CMR wasn’t getting traction (at least as a name). Frederick Newell’s Why CRM Doesn’t Work was one of the first places CMR was put forth (and very well too). But it’s a non-starter as long as it’s coming from the sell side and trying to lock in the customer. Adriana Cronin-Lukas unpacks that problem very well.

Multi-sided markets are very well aligned with VRM. Thanks to Graham for reminding me to contact Andre Hagiu here at Harvard to talk about that.

I’m also a fan of John Hagel and infomediaries as a concept, and I think both are well-aligned with VRM as a concept.

Will VRM succeed where those other ideas are languishing, or support them in some ways? I dunno. Hope so. Meanwhile, I want to offer an olive branch.

Graham is a veteran of the CRM business. It is essential that CRM folks know that VRM is not opposed to CRM. VRM gives CRM systems more to relate to. It gives customers means for bearing some of the relationship weight — ways that work in consistent ways across many vendors, for the conveniences of both sides. So it’s VRM + CRM, not VRM vs. CRM. Unless we make it the former, it won’t work. And it is essential right now to make clear that VRM is a CRM-friendly movement.

Finally, this whole exchange illustrates why I’ve been reluctant to publicize VRM in the absence of working code, working products and working services. It’s impossible not to talk about it, of course, because VRM is a movement with a growing number of people who need to be able to think and talk about it. So here we are. I hope Graham and others will look more carefully, and with more open minds, at what we are actually doing, and cut us a bit of slack while we talk about it in the meantime.

10 Comments

  1. John Cass says:

    Doc, to me these ideas are already in operation, people write blogs, and complain about companies, or look for new ideas, to me that’s a VRM system. Primitive maybe, but still working especially if you write about Dell, Comcast or UPS, as a customer I am going to get a connection.

    Would I be correct in thinking that really VRM is really more about companies thinking about how they configure their business processes to allow for VRM rather than customers building their own tools?

    I also think you should publicize the VRM ideas even more, why not more crowdsourcing? This idea has already influenced me, and helped with my thinking, I think other people can benefit.

    Also, how about thinking of ways to do incremental VRM, what are the steps we need in place to get to VRM?

  2. Jonathan says:

    Wasn’t it interesting how strident Graham’s reaction was to VRM?

    He must really perceive it as a kind of threat to CRM concepts — which obviously it isn’t, since VRM is only really practical when it can talk to CRM systems.

    And Graham had such a strangely lazy characterization of the average consumer. Even putting aside his misunderstandings (“take back the data,” etc.), in his mind consumers just aren’t passionate, particular or opinionated about the stuff they buy.

    Which is just so weird, because I think it’s widely held that almost everybody has (at least) a short-list of product/service categories that they feel very strongly about… Your friend who is a nut about mountain bikes; your co-worker who is super-particular about his airplane seat assignments and hotel rooms; your wife who has tons to say about various baby gadgets; your brother who is the guy you turn to for advice on home audio/video stuff; your next-door neighbor who knows everything about lawnmovers, and would love to custom-design his own; and so on. And those are just the fanatics.

    Enabling people to describe what they want doesn’t mean that every consumer HAS to do so in order to buy anything, but it makes the total pedestrian assumption that for lots of stuff people have lots of strong preferences.

  3. Doc Searls says:

    John, you’re right that some of the goals of VRM are addressed by some of the clueful things that some companies are doing. I’ve been shopping for a cheap desk for my kid and I’m amazed at what a great job Staples does of letting customers rate their stuff, for example.

    We’re a growing community with a number of efforts going on simultaneously. I’m pretty involved in getting VRM stuff going on the Public Radio Tuner. There’s The Mine! and Mydex in the U.K. Other projects too.

    Crowdsourcing will be involved, but our focus up front is in equipping individuals with new tools, and then letting the crowd effects grow from there.

  4. Doc Searls says:

    Jonathan, +1 on all you said. Thanks!

    I’ll add that I don’t want to be defensive about VRM or give Graham a hard time — even though he’s pounding pretty hard on VRM here. It’s important that leaders in the CRM world understand that VRM is a friendly and not a hostile set of efforts. As well as the fact that it’s early.

  5. nb109 says:

    Yeah Graham — what the heck!

  6. Jarod McCormick says:

    Hi Doc,

    I’m a conceptual engineer out of Malibu CA. I’m looking for a way to get in touch with people that are involved in the development of these products. I have a significant amount of insight to contribute to making VRM a (profitable) reality, and am really excited to uncork these ideas and get cracking with this. I have been developing these systems for over a year and a half now, and if you have any leads, please let me know!!!

    The action is just getting started and nobody has this figured out yet. I have some really sophisticated work I would like to share with anybody interested in developments in VRM/CRM.

    http://www.storefrontbacktalk.com/securityfraud/would-crm-work-if-customers-have-an-onoff-switch/
    http://www.storefrontbacktalk.com/payment-systems/will-consumers-punish-retailers-that-misuse-crm-data/

    etc. etc. etc.

  7. Dave says:

    A friend recently directed me to an argument that flared up between Graham Hill and Doc Searls on the subject of Vendor Relationship Management (VRM) and Doc Searls’ VRM Project. Graham’s critique is essentially existential. He claims that VRM can’t exist, and if it does exist, it’s irrelevant and a giant step back for commerce and the consumer.

    Graham
    Searls
    Graham makes a compelling case by dint of its organization. He outlines a dichotomy between CRM and VRM. Either customers own the data or companies own the data. If customers own the data, it would be subject to four claims. And he strings up VRM as a straw man to be invariably dismissed. Unfortunately, the dichotomy is false and the claims don’t match subject — VRM.

    But that’s not so much the issue. Instead, it reveals two implicit claims: consumers have no interest in their consumption; consumers and their vendors would not benefit from the tools to organize and act on that interest.

    Let’s start with the dichotomy – the existential question. Is VRM impossible?

    Rather than companies owning huge databases of customer transaction data which they can mine for their own advantage, customers should take control of their own transaction data and selectively release it to companies when they want something from them.

    For a customer to take control of their own transaction data doesn’t require companies to give up control. Isn’t this what ERP systems do when they manage and help negotiate with suppliers? That relieves us of the either/or. Lo — VRM can exist, and it can exist if we have the tools to harvest transaction data, understand it and act on it.

    Moving to the fallacies. First, the data is already out there. I receive credit card statements, mobile phone bills, and other statements that give me the data. Second, of course people want control of the marketing sent to them. Does that mean that they don’t want the transaction data? No. Third and fourth, these arguments could be parsed as non sequiturs, bundled in a false dichotomy and finished by begging the question.

    Starting with the position that VRM can’t exist, Graham proceeds to say, if it were to exist, it wouldn’t have access to data. If it did have access to data, people wouldn’t want it. And if VRM cleared these hurdles, it would do nothing less than attempt to supplant the free market system by way of managed markets and the principled dissolution of Apple as we know it.

    The distillation proves extreme, but it’s revealing. It uncovers the two claims driving Graham’s post: consumers have no interest in their consumption; consumers and their vendors would not benefit from the tools to organize and act on that interest. VRM is a bet that these are both false. If they are, there’s interest and an economy, and that could be a business.

    First, consumption. People are passionate, particular, and opinionated about the stuff they buy. We call those people enthusiasts, and we can find them in the Makers Mark Ambassadors program, Ducati owner groups, and even fanboy sites for the media they consume. They might obsess over any one step in the process: finding, acquiring, managing or consuming — or, all of the above. But people are interested in their consumption.

    Second, organization, or VRM. Consumers benefit from tools to manage their vendors. Cellartracker.com comes to mind, and the Mint / Wasabi effort looks like an early attempt to better understand spending through parsing credit card data. The problem with these is that they may or may not make money.

    So yes, the bet is right, but the question remains: does it make money?

  8. coldbrew says:

    The cynic in me thinks Hill’s post was link-bait and/or possibly a way to generate arguments he might use to sell the concept of VRM or some derivative.

    Here’s a quotation from the orginal post:
    “VRM is an extreme solution that no-one is really looking for. Not Customers, not companies, not markets, no-one.”

    Later in a comment:
    “I am pleased that the post has stimulated so much discussion around VRM. It is an important topic and deserves to be much more widely read and discussed.”

    I am not able to reconcile these two sentiments issued by the same person. It is interesting to read the responses, however, no matter who or what incited them.

    I’m sure Hill means well, but I’m not sure encouraging this approach with a response is a good idea.

  9. alecmuffett says:

    > I’m sure Hill means well, but I’m not sure encouraging this approach with a response is a good idea.

    +1 – sorry to be so brief, but @coldbrew hit the nail on the head; I feel Hill’s a troll.

    - alec

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